Delta Cuts Q1 Forecasts on Weaker Domestic Demand
Delta Air Lines has revised its first-quarter revenue and profit outlook amid softer domestic travel demand and reduced corporate and leisure bookings. The carrier now expects revenue for the quarter ending March 31 to grow by no more than 5% compared to last year. This figure represents a downgrade from an earlier forecast of 6% to 8% growth announced in January. Additionally, Delta slashed its adjusted earnings forecast to a range of 30 to 50 cents per share, compared to previous guidance of 70 cents to $1 per share.
Following the announcement, Delta’s shares fell sharply, declining over 5% during regular trading and more than 13% in after-hours trading. This market reaction reflects growing investor concerns about weakening consumer confidence and the broader impact of macroeconomic uncertainty on domestic travel demand.
In a recent securities filing, Delta explained that the recent reduction in consumer and corporate confidence has significantly affected its outlook. The filing stated that increased macroeconomic uncertainty has driven a softness in domestic demand, prompting the company to adjust its first-quarter forecasts. Despite the downgrade in short-term expectations, Delta maintained its full-year outlook, signaling that the company believes long-term growth prospects remain intact.
Delta CEO Ed Bastian addressed the situation during an appearance on CNBC’s “Closing Bell.” Bastian acknowledged that while he does not foresee a recession in the near term, he noted that consumer confidence has weakened, leading both leisure and business travelers to pull back on bookings. He also mentioned that safety concerns have played a role in the recent downturn. Bastian pointed to a deadly midair collision involving a regional jet and an Army helicopter in January in Washington, D.C., as well as a recent crash on landing in Toronto, which, although not fatal, further contributed to the cautious sentiment among travelers.
The revised forecast comes just one day before a high-profile JPMorgan airline industry conference, where CEOs from major carriers are expected to update investors on current demand trends. Delta stated in its filing that demand for premium travel, international travel, and loyalty revenue growth is still in line with its expectations, even as domestic demand remains challenged. Other carriers such as American Airlines, Southwest Airlines, and United Airlines are also scheduled to provide updates on demand trends to Wall Street in the coming days.
Recent weeks have seen airline share prices drop sharply as signs of weaker consumer spending impact the sector. While the travel industry had demonstrated resilience compared with other sectors following the Covid-19 pandemic, these new challenges underscore the vulnerability of air travel to fluctuations in consumer sentiment and economic uncertainty.
Industry analysts suggest that Delta’s move to adjust its forecasts is a pragmatic response to the current market environment. The airline’s decision to maintain its full-year outlook despite a downgraded first-quarter forecast reflects a belief in the long-term recovery of the travel sector, particularly in premium and international markets. However, the immediate impact of declining consumer confidence and safety concerns continues to weigh on the domestic segment, which remains a critical component of Delta’s overall business strategy.
As Delta prepares for further updates at the upcoming industry conference, investors and analysts will be closely watching how the airline adapts to the evolving market conditions. The company’s ability to manage short-term challenges while capitalizing on long-term growth opportunities will be key to its future performance in an increasingly competitive and uncertain travel landscape.
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Sources: AirGuide Business airguide.info, bing.com, cnbc.com